If a business sees a market segment in which sales are predicted to double to the scale of 15% of the total market in the next five years, you would expect them to be quick to find ways to enter it. However, if you are Sainsbury's, and have a carefully nurtured image and market position to protect, you might baulk at rushing into the discount segment of the market, in case it interfered with that image or cannibalised your market.read more...»
The FT produce some superb videos that are ideal for use in the Business & Economics classroom - and this one on the UK steel industry is another excellent teaching resource - particularly for students researching UK manufacturing.read more...»
As BUSS4 students start on their research into UK manufacturing, one piece of data that they should keep an eye on is the CIPS Purchasing Managers Index. This is produced monthly by the Chartered Institute of Purchasing and Supply by surveying managers responsible for purchasing materials in manufacturing industries, and so it gives an indication of the level of activity. A reading above 50 (shown by the red line on the graph above) shows growth in activity, below 50 shows a decline.read more...»
Tesco's share price slid again today, although the firm has announced that the new Finance Director Alan Stewart started work three months earlier than expected.read more...»
News about Tesco's troubles comes thick and fast, today's bad news about overstating profits has wiped off 11.59% of the share price. It fell by 26 pence to £2.03.read more...»
There is plenty of concern about the slowdown in China's growth, and what this might mean for businesses looking at expansion via China. To what extent should those businesses be worried about slower growth? The issues here are very relevant to the external environment in China, and could be useful for bullet points 1 and 6:read more...»
Boston Consulting Group have produced a fascinating new report which investigates the competitiveness of the world's top 25 goods exporting nations. Their press release highlights significant changes in the world order over the last decade. The newly-minted BCG Global Manufacturing Cost-Competitiveness Index incorporates four factors: energy costs, productivity, wages and exchange rates. That analysis shows that Mexico now has lower manufacturing costs than China, while Brazil is now one of the highest-cost countries, and the UK is the cheapest location in western Europe.
I am cross-posting this from the Economics blog as I think it should be useful for BUSS4 students; in a rather low key report on the BBC website this week, I found the shock news that China had a trade deficit of $23bn in February. This is alongside the HSBC Purchasing Managers’ Index (PMI) which focuses on small privately owned businesses, and which gave a reading of 48.1 for March, compared to 48.5 in February - with any figure below 50 indicating a contraction in manufacturing activity. And today there is a forecast of the ‘official’ PMI, which looks at the larger state-owned factories; although this is slightly over the ‘expansion’ measure of 50, it is only predicted to come in at 50.3 - and is subject to a 0.3 downwards correction to allow for seasonal patterns, according to Louis Kuijs, chief China economist at the Royal Bank of Scotland.
A combination of excellent news articles from last week have helped my students and I to fully understand the size and scope of Alibaba. Former teacher (and self-confessed technophobe) Jack Ma’s online company has experienced exponential growth and led to fear and envy from some of China’s (and the world’s) biggest companies. However, in his modesty he has described himself as “a blind man riding on a blind tiger”, giving him instant legend-status in our eyes!
The attached presentation has videos, hyperlinks and infographics that allow students to focus on the various elements that have led to Alibaba’s potential $150bn valuation. Each slide focuses on a different section from the BUSS4 specification thus giving information on leadership, strategy, competition, diversification and the economic (electronic) environment.
Hope it helps.
Speaking at his annual address to parliament, premier Li Keqiang said “we are at a critical juncture where our path upwards is very steep… deep-seated problems are surfacing; painful structural adjustments need to be made”.
This comes at a time when there are reports of a potential sub-prime debt crisis in the “shadow banking” sector (worth between $604bn - $3.7 trillion, depending on the source).
Also, according to the Ministry of Human Resources, the number of job openings fell, with city jobs in Q4 falling 13.7% from the preceding quarter.
Finally, and perhaps most importantly, the first domestic corporate bond default happened last week. Energy company Shanghai Chaori Solar failed on a £9m interest payment. The state has previously bailed out Chaori and other such businesses, but chose not to this time, generating much speculation from analysts.
Many say it was a necessary move from the government to install a better risk culture, tackle China’s credit problems and starting with the “painful adjustments” necessary to decelerate growth.
However, Bank of America Merrill Lynch stated “We doubt that the financial system in China will experience a liquidity crunch immediately because of this default, but we think the chain reaction will probably start.”
This was echoed by Philip Li of China’s International Credit Rating, calling it “a domino effect”, and coupled with Robert Peston’s recent BBC article (and other sources below), should help students construct a strong case that the risks of operating in China now outweigh the rewards.
In 2012 Anthony Jenkins (nicknamed “Saint Anthony”) succeeded Bob Diamond and promised to clean up Barclays and eradicate the worst excesses of the banking industry. Speaking to those who received huge bonuses for unscrupulous behaviour, he said “my message is simple: Barclays is not the place for you. The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues”.
Despite this, profit dropping 32% to £5.2bn, and making 3,700 jobs cuts last year:
- Jenkin’s himself pocketed just under £5m in shares
- Staff paid over £1m increased from 428 to 481.
- The bonus pool increased 10% to 2.4b
The justification for this? Many senior traders have left, or threatened to do so, and to keep hold of the top earners, he had to offer top pay. Had he not, the investment wing of Barclays would have plunged into a “death spiral”, with staff and high-value customers going elsewhere.
This is part of the bigger issue regarding European Commission’s rule to reduce banking bonuses, how George Osborne is fighting the decision and why, it would seem, he really didn’t need to as bosses of RBS (81% owned by tax payers) and HSBC also side-stepped the rule by giving large “fixed pay allowances” in the form of shares.
This story always provides great impetus for emotive debate on BUSS4 topics such as government intervention, culture, pay and leadership.
The rate at which China's economy has grown in recent years (as measured by the growth in GDP) is slowing. China's economy is still growing - but slower - and this has significant implications for both domestic and overseas businesses in China as well as the rest of the world trading with China.read more...»
Data published today by the Office for National Statistics once again shows that earnings have not risen above the rate of inlfation for the 5th year running.read more...»
A musical starter that introduces most elements of economic environment... in the funkiest way possible!
Wages are rising fast in China – many economists believe that China has hit a stage in its development at which demand for labour starts to grow faster than supply, creating labour shortages and pushing up the price of labour (something economists refer to as a Lewis Turning Point).
Why is this and what are some of the key business implications?read more...»
We used the FT video below during our recent CPD days on China and it is an excellent introduction to a core issue for students looking at the opportunities and threats for businesses looking to trade with and in China.
China's stunning record of economic growth has largely been driven by investment and exports. In particular, following the global economic slowdown in 2007-10, China responded by accelerating investment in infrastructure projects and the programme of mass urbanisation which has created the largest human migration in history.
A consequence of this approach is that China's economic growth can be said to have been "unbalanced", with the economy over-reliant on investment spending which cannot be sustained indefinitely.
China is now looking to "rebalance". That's a key term that I fully expect to feature in strong essays written by AQA BUSS4 students in 2014.read more...»
With the high-profile visits of George Osborne and Boris Johnson to China this week, there is a glut of resources available on the BBC website which could be very valuable to BUSS4 research.
Here are links to just a selection:read more...»
Innovation turns business markets upside down, it alters the price and use of resources, it creates and destroys revenue flows and profitability as well as the way we work.
Peter Day a former BBC presenter considers a significant changes in a BBC Radio 4 series this weekend. Consider how the internet, search engines and 3D printing or additive manufacturing might alter market production processes, job opportunities marketing and economies.
There is much to discover and discuss in his superb introductory article linked above. The broadcasts are linked here.
John Lewis are opening a store at Heathrow terminal 2, which will be the Partnership's smallest store, the first away from town and city centres and an important step in their international strategy. For a while I’ve been looking at the idea of place in the John Lewis marketing mix, and the business has clearly identified deeper trends in retail location.read more...»
Excellent BBC2 business documentary last night on the growth of low cost airlines 'Flights and Fights: Inside the Low Cost Airlines'. The programme explores how Ryanair and Easyjet have transformed the European airline industry.
From the employer's point of view, a zero hours contract is a great example of the benefits of the flexible labour market. They allow the employer to change the number of hours an employee works each week, with more shifts offered when they are busy, and fewer when they are not; costs can therefore be controlled and matched more exactly to revenue. They are particularly popular with the fast food outlets like McDonalds and Subway, and high street chains like Boots and Sports Direct. Those employers draw heavily on the younger end of the labour market, with many of their staff being students who are looking for flexible shifts that work around their study hours; for them a zero hours contract may work well. However it is also important to consider whether this will have a detrimental effect on the business's culture; with a high proportion of staff working irregular hours it may become much more difficult to instil a culture and sense of identity with the organisation.
It is now six years since the global financial crisis triggered a prolonged downturn in economic activity. The UK economy, like other developed economies, has struggled to escape from a period of stagnant economic growth.
However, despite the weak economy, many UK firms have succeeded in significantly growing their revenues and profits.
Here are three examples of such businesses. Their strategies for success are different – but there are also some similarities.
Can you compare and contrast these three – and also identify some other businesses that have enjoyed similar success despite the tough economic environment?
You might also consider:
- What factors have driven revenue growth at each of the three
- Has their growth strategy been based on organic or external
- To what extent has their growth been driven by international
- Do you think their recent success can be sustained?
- What factors might that continued success depend on?
Seeking a way to make costs, revenue and profits interesting for my business students and get them digging deep into the reality of cost control, revenue generation I developed the "Shocker or Cracker?" activity.
This requires students to conduct independent research within the classroom using their own electronic devices (laptop, tablet or samrtphone) and helps to generate a healthy sense of competition.
There has been increasing debate about the merits of adopting a Bring Your Own Device (BYOD) policy within schools and colleges so I thought I'd give it a go...read more...»
Here is an updated revision presentation on aspects of the economic environment for UK businesses in the late spring of 2013.read more...»
Whenever you are investigating a firm’s accounts – perhaps using ratio analysis – you quickly realise that the answers you’re generating only really make sense when you compare them against something, like last year’s figures, or those of a rival.
My students are looking at a case study (OCR F297) in which a firm is making a return on capital of approximately 11%. We were wondering if that was a ‘good’ return or not. I’ve come across an article that directly answers that question, and raises some other points that offer a revealing insight into the health of Britain’s businesses.read more...»
Perhaps we’re all guilty of picking up on ideas or stories that support a particular view that you feel is right. Ever since I began reading about doubts over the benefits of outsourcing and offshoring I’ve seen more stories on the same theme. There was Bob, who had outsourced his own IT job to China. Then came a special report in The Economist that asked some searching and detailed questions too (you can read more here).
And now the definitive proof - the "Nation's Noodle" is coming home. Golden Wonder's pot noodles are currently made in China and shipped 10,000 miles to the UK, but the 191-year-old British company that makes the product has cancelled its Chinese contracts in favour of making its own noodles in Leeds.read more...»
The value of the pound - or the exchange rate - is back in the news. It looks as though enough international investors have sold £££s that its value has fallen quite sharply. Here are some reminders of what this means, and some helpful reading links.read more...»
Threats - the T in SWOT analysis - are increasingly important to the CEOs of leading companies around the world.
Today's CEOs are concerned about a wide range of potential and ongoing threats to their business growth prospects - from catastrophic events, to economic and policy threats, and commercial threats.
In this short video from PwC, CEOs from a range of companies around the world, talk about their key concerns and the potential impact of these disruptions.read more...»
The FT today publishes a great report on the culture at Amazon's Rugeley distribution centre. An interesting insight into the culture of a cost focussed and highly effiecient business that is described by founder Jeff Bezos as: "Our culture is friendly and intense but if push comes to shove, we'll settle for intense."read more...»
If you had lasagne last night you might be wondering if it was the last remains of the non-running hurdler "100% Pure Beef". Findus have a major problem to resolve after tests showed that their lasagne had been made from horsemeat.
The central thrust of their argument is that the advantages of offshoring work (outsourcing overseas) are falling, fast. The logic of returning work to the developed economies looks fairly convincing.read more...»
I adapted the title for this blog from an article and video clip I came across in the Telegraph, which contains the observation that "consumers forgot that Blockbusters still existed". I don't really think its demise was very hard to predict, and I think most of you will have seen this coming for some time.
But with the decline of Blockbusters - and so much other bad news on the High Street - I've decided to bundle together a lot of ideas and links to encourage students to work independently on this topic, to see if they can understand some of the forces putting pressure on our High Streets at the moment.read more...»
This afternoon The High Court appointed PricewaterhouseCoopers as Administrators of Jessops the high street camera retailer. The company has debts of £80m.read more...»
This is a really important development for business students who need to appreciate the dynamics of the global economy to understand. The OECD has forecast that, within four years, China will overtake the USA to become the largest economy in the world. The value of China's GDP in 2013 alone is forecast by the OECD to be bigger than all the Eurozone economies put together. China has arrived - and it has hugely significant implications for business.read more...»
I'm going to be discussing economic growth and the business cycle in my first Business Studies lesson back after half term, and am hoping this activity will really help the students to think carefully about how the changing business cycle affects a business.read more...»
As the October 10th deadline approaches, the board of BAE face significant difficulties to
complete the proposed merger with EADS.
Here is a useful article from the BBC which discusses how the weather can influence how much we spend. A handy starter to show that demand isn't always solely influenced by price. You can use the additional Q&A section here as an extension for your brighter students.
The BAE EADS merger proposal ought to help pupils attempt develop analytical skills using PESTLE, SWOT or stakeholder models. Can you use these management tools to develop your analysis and evaluation and go beyond application and understanding?
Or should that be 520 million? That’s the amount that one trader apparently spent, in dollars, in a drunken night betting his company’s money on oil price movements. He initially lost almost $10m (hence the title of this blog).read more...»
If you want to show students an example of how even the worst of economic downturns can still present an opportunity for some businesses then you could do worse than show them this article from the BBC about the net profit figures from pay-day loan specialists Wonga.com. The article reports that Wonga have seen a trebling of their profits during 2011 as customers feel the pinch of the recession and look for a quick way to raise cash.
The article strays a little into negative reporting but it reminded me of a lesson I observed last year where the interest rate charged by Wonga was used as an example for students who were calculating compound interest using spreadsheets (you're not a true teacher of business studies until you've attempted to deliver a lesson on compound interest!). Given the APR levels set by the company, students were calculating that a £100 loan that was not paid back for 4 years would accrue a debt of £315 million!
British Aerospace (BAE Systems) and EADS announced that they are discussing a merger.
Building up market share in a competitive market with mature brands, similar products and large rivals can be difficult, but attracting the attention or interest of potential customers may require innovative approaches to marketing.read more...»
Here’s a conundrum. Why is employment in the UK economy rising (and unemployment falling) at a time when the economy is still shrinking?
The number of people out of work fell by 46,000 to 2.56 million in the three months to June 2012, according to the Office for National Statistics (ONS). But in the same period the UK’s national output is supposed to have shrunk by 0.7% - so what is behind the puzzling statistics?read more...»
The car industry is such a good place to go for examples of Business Studies in action. Here, the problem under discussion is capacity utilisation. This concept is very closely linked to the idea of a breakeven point.read more...»
Business Studies students often find economic influences a difficult topic to get to grips with. Here is a current example of a firm that has been hit by tighter government budgets brought about by recession and the need to cut spending.read more...»
The Greek economy contracted 6.5% in the first quarter of 2012. Carrefour, the massive french supermarket which is the world’s second largest retailer, has been operating in Greece in a joint venture with local partner Marinopoulos since 1999 and had 41 hypermarkets, 287 supermarkets and 479 convenience stores in Greece and Cyprus. They made 2.2 billion euros of sales there last year, but are thought to have made a loss of 440 million euros on that revenue.
A fall in sales of a further 16% in the first quarter of this year has now convinced Georges Plassat (a new CEO who took up his post last month) that it is worth taking a loss of 220 million euros to get rid of the business by selling it to the Joint Venture partner for just one euro, and the stock market clearly agrees with him as shares in Carrefour rose by 2.8% in Paris. Here is an example of a new CEO quickly making a decision to mark a change in strategy. Reuters quotes an un-named analyst who implies that the company needs to focus on its core business: “Greece was a market which had been dragging on them. They have their hands full with other projects. It’s better for them to concentrate on saving their French operations.”
M&S took a similar decision last month when they took a 44.9 million pound write-off on their Greek business. French bank Credit Agricole is transferring assets to France from its Greek subsidiary Emporiki bank. Given the deep uncertainty about what will happen to the Greek economy, a business strategy of retrenchment is looking like one which may gain momentum amongst overseas investors.
Our BUSS4 blog has a series of streamed revision presentations which students may find helpful in supporting their studies ahead of the exam. They are listed below:read more...»
The textbooks often find it hard to come up with a topical example of contingency planning which has widespread application - but I suspect that the possible break-up of the Euro zone is a good one. In fact I think this has to be the best example of a possible future event which is of such significance that almost every sizeable business needs to consider contingency planning.
With that in mind, this pdf document from accountants Deloitte provides some useful evidence of how contingency planning works. Its a detailed document and certainly not worth printing or reading in full. I have jotted down some examples from the document further below to illustrate the role that contingency planning plays for this potentially significant risk.
The key for students is to use examples like this to help develop the depth of their analysis. By using the Euro crisis, they are also able to demonstrate the use of relevant, independent research in their answers.
Let’s take a look…read more...»
I was reading today that BMW i8 engines are to be built in Birmingham. Why would the German-based car maker want to produce engines in the UK? What’s brought them here?
I often find this is a great induction session for students who are new to Business Studies, or those progressing from AS to A2 and are looking to apply their knowledge and understanding.read more...»
Two themes wrapped up together here.
Firstly, you will be sure to have noticed references to a ‘Shareholder Spring’ in which normally quiet and docile shareholders have been increasingly resistant to executives’ claims for ever higher rewards. There’s a link to a very handy summary below.
Secondly, this serves as a reminder of one of the several ways in which you can boost the evaluative component of your answers.